Invesco Mutual Funds under scanner after allegations of mismanagement

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A whistleblower had filed a complaint against Invesco mutual fund. The complaint has been filed with the SEBI, the US Securities and Exchange Commission alleging irregularities in the management of its fixed income schemes. Let us look at the details:

Summary in brief

 About Invesco Asset Management (India)

  • It is a US-based fund house that entered the Indian market in 2013 in partnership with Religare Securities Limited. Later, they bought the complete stake in the company.
  • They offer different equity and debt schemes to Indian investors under various schemes.
  • As of December 2021, they had Rs 55,622 crore of assets under management (AUM).

The allegation by whistleblowers

There are three allegations against the company:

Allegation on chief investment officer - The whistleblower reported that the former CIO of Invesco MF's fixed income scheme also acted as an advisor to its offshore portfolio management services that were focused on Indian debt.

However, SEBI mandates companies to have a wall between portfolio management services (PMS) and mutual funds. It means the same person cannot execute trades for both divisions.

Trade execution - In violation of regulation, Invesco India's fixed income team executed trades on behalf of their offshore funds. It was to be done by offshore counterparts as their relationship was advisory in nature.

Transfer of funds - Post the default by ILFS in 2018, the fixed income team of Invesco MF identified the companies (including Dewan Housing Finance) that were likely to come under stress. It then transferred the stressed funds to the offshore funds. The concern is that the clean-up was done at the cost of offshore clients and deliberately.

Whistleblower details and actions on them

  • The whistleblower's name is never disclosed. As per the information available, he used to manage three schemes for Invesco MF.
  • They first raised the issue with the senior management and on the internal Invesco hotline.
  • Due to the slow progress of the internal investigations, the whistleblower approached Sebi and the US regulator.
  • The whistleblower was dismissed in July 2021 for conduct unbecoming. Later, the whistleblower filed a civil suit for wrongful termination in the Bombay High Court.

Invesco's response

Invesco Asset Management (India) said that it maintains policies and procedures for investigating allegations of improper conduct received from any source and always handles such matters in a manner consistent with global best practices.

It said in a release, "Invesco seeks to maintain excellent relations with all our regulators. We cooperate with any regulatory inquiries (including any examinations or investigations) in a manner that is transparent and consistent with global best practices."